Friday, September 14 12:22:13
European stocks jumped to a 14-month high today as the launch of a new monetary stimulus programme from the U.S. Federal Reserve boosted stocks exposed to economic growth and momentarily eased concerns about Europe's crisis.
After the European closing bell on Thursday, the Fed said it would pump cash into the U.S. economy each month until it saw a sustained upturn in the weak jobs market and pushed back expectations for when it would raise interest rates.
Basic resources stocks soared 5.7 percent on the prospect of growing demand for metals, with Kazakh-focused copper miner Kazakhmys leading gainers with a 12.9 percent jump.
"There is an almost synchronized policy stimulus and central banks in the U.S and Europe are at maximum dovishness, which is driving...multiple re-rating," Emmanuel Cau, a strategist at JPMorgan, said. "In a blue sky scenario, there can be another 15 percent or so rerating of the market, but beyond that you need to have clear signs that the economy is accelerating and so far we're not seeing this at all."
JPMorgan expects European financial shares to outperform the other cyclical sectors and has a preference for insurers over banks, given the latter sector's capital shortfall and exposure to a deteriorating credit market.
Among commodity-related stocks the bank preferred energy to miners, which face oversupply issue as the economy in China, the world's largest consumer of metals, slow.
Cau highlighted greater upside potential in European stocks, which trade at lower multiples and have been shunned by global investors, than on Wall Street.
A STOXX index of Europe's 600 largest stocks was trading at just over 10 times its expected earnings for the next 12 months, compared to a 10-year average of 11.79 and a 12.56 multiple for the U.S. Standard and Poor's 500 index.
The STOXX, up 1.3 percent at 275.89 by 1034 GMT, sent a bullish technical signal on Friday by opening higher than Thursday's high of 272.75, in what is referred to as a 'bullish gap'.